How to Validate Your Startup Idea with @RobertSwisher #vcbuzz

How to Raise Your First Round of Startup Financing with @RobertSwisher #vcbuzzHave you been thinking about starting a new project? Do you have a cool idea of a startup?

The first step is to validate your startup idea: Let’s discuss how to do that!

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About @RobertSwisher

We have already met with @RobertSwisher over at #vcbuzz, so you can read about him here.

Since that chat, Robert has become founder of frendli.com, so he knows a lot about launching and financing a startup.

Questions we discussed

Q1 Why did you decide to start frendli.com? What does the site do? How did you come up with the idea?

Frendli is a mobile app that helps people meet new friends by connecting them with people who share their interests, activities, tastes, aspirations, location and lifestyle. First, we help them to break the ice and start a conversation online.

Next, we drive them offline to build friendships face to face by incentivizing through deals and discounts on experiences and activities they share an interest in. Birds of a feather flock together!

The idea for Frendli came out of personal experience. It first came to me when trying to plan a New Years Eve party a few years ago. Most of my friends were either going to be in bed early because of kids or wanted to be out on the town. Most weren’t interested in a house party. It got me thinking that my own circle of friends was changing as people moved, started families or became interested in different things as they moved through life stages.

After talking to a bunch of other people I discovered how difficult it is for people to make new friends as adults. As a did more and more research the need for a service like this became more and more apparent.

The statistics are wild, for example we lose half of our current friends every 7 years.

Not yet. We’re launching in San Diego as our first market in April. Hoping to jump the pond soon though 🙂

Q2 How do I know if my idea can be a business?

The first thing you should do is identify what problem you’re solving. Are you creating a solution for a real pain point for people of just a nice-to-have?

Alleviating pain is usually much more compelling to people than giving pleasure. If you’re going to make a better X a good rule of thumb is that it needs to work 10X better than the current solutions for people to switch over.

Look for competitors. Direct competitors and indirect. For Frendli as an example that involved thinking about how do people meet and make friends now.

People are likely solving the problem you aim to solve already for themselves, but probably in a less than ideal way. Figure that out.

Be a little worried if you have no direct competitors. Everyone thinks it will be great to be the first into a market but most likely that’s not the case unless you’ve come up with something no one has ever thought of.

If no one else is trying to solve your problem, it may not be big enough to support a business to solve it.

As yourself these questions: Why this? Why now? Why me?

Why is now the right time for this business to happen? What are the market forces or trends that will be supportive of what you’re doing? Why are you the right person to do it? What unique skills do you have that will make this business a success?

If you’re raising money, your investors will want to know the answers to these as well.

Q3 How can I test my idea before jumping in?

Read the book The Lean Startup. Learn about the methods for using a MVP (Minimum Viable Product) to test your theory. Build the smallest simplest test you can to get something in front of potential customers and learn from their feedback.

Interview people, A LOT. Talk to as many people as you can and do customer interviews constantly. Don’t ask leading questions or talk to people who are going to be nice and not give you their honest opinion.

People you don’t know are the best to speak with. At this point I’ve done 150+ customer interviews for Frendli and the product isn’t even launched yet.

Try to picture the biggest assumption you’ve made that must be true for your business to work. Then test that as fast and cheap as you can. Use your customer interviews to understand their perspective. Once you test that one thoroughly, move on to the next one.

Here’s a list of some good resources.

Can’t take credit for the wiki, but some great info there

Q4 How do I know if I’m ready for a startup?

The most important thing is that you are in it for the long haul. If you’re not passionate about the problem you’re solving you aren’t going to be able to stick it out when the going gets tough, and it will.

You also have to be ok with a tremendous amount of uncertainty. Startups are very risky and over 90% fail. If that’s not something you’re prepared for it may not be for you.

You should also be in a financial position that you can go without pay or at least very reduced pay for a period of time. Probably up to a year.

Most companies don’t make money at the beginning and you are most likely not going to be able to pay yourself the kind of salary you’re making today when you’re getting started.

Also, make sure your family is prepared for the risk and demands of startup life. Relationships get tested.

Same here, but you have to let go and realize seeing beyond 3 or 6 months is nearly impossible in the early days.

Q5 How do I decide if I should raise money or bootstrap?

This is a tough question and the answer is really unique to your business.

In a perfect world bootstrapping would be the best because you retain the most ownership of your company and don’t really answer to anyone. Most businesses need to raise money of some kind though to get started or to grow.

If you’re building a business that needs to grow fast you’re likely going to need to raise money somehow. If you are building a business that can grow slowly and still be successful, maybe bootstrapping will work for you.

Try to get a far as you can without raising money and when you do make sure you know why you need to and how it will be spent.

If you’re building a business that you think could ever IPO, you’re definitely going to need to raise money to get there. If your goals are never to sell and run it for a long time, bootstrapping may be fine.

Just remember that with every dollar you take in funding you give up a little control.

One of the benefits of having a co-founder is that while one of you is raising money the other can be focused on keeping the biz running day to day.

Before starting Frendli I spent about 6 months just researching and doing customer interviews, figuring out what the product needed to be

Q6 What tools do you find useful for planning a launch?

The Lean Canvas (an update version of the business model canvas) is a great tool to answer questions about your business. It forces you to explain the core of your business on a single page. This is invaluable for validating your idea.

Runway is a helpful tool for forecasting how much money you need and how long it will last.

Our previous entrepreneurship chats:

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Comments

  • I am glad to catch up with this chat. thank you for the great work you are doing

    Angu08.05.2018

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